As the flow of productivity and employment numbers stream in, it is increasingly clear that American firms are committed to doing more with fewer people and paid hours. Today's employment numbers meld well with yesterday's productivity numbers. We are seeing firms doing more and more without increasing hours and headcounts. Our employment picture in February was essentially flat. We lost another 36,000 jobs and our unemployment rate held steady at 9.7%. We need to remember that America has to create 100,000-130,000 new jobs per month to keep up with population growth. The snow and revisions aside, our employment picture looks flat despite rising profits and increasing GDP. This is cause for concern. Our economy remains very weak at creating jobs, hours and incomes even while we are in an increasing GDP and profits recovery.
Employment Report:
At 8:30AM EST on March 05, 2010 The Bureau of Labor Statistics released the February non-farm payrolls report. The civilian labor force participation rate is at 64.8%. This tells us that less than two thirds of the population is in the labor force- employed or unemployed. The U-6 broad measure of unemployment, that includes involuntary part time workers and those marginally attached to the labor force, rose to 16.8%. This number remains painfully high and suggests widespread economic suffering. It appears that we have reached a point of little change in the employment picture. 41% of our unemployed have been out of work for at least 27 weeks. We have not found a way to include the labor market in our economic "recovery". This offers insight into the continuing trouble in the housing market. Rising tides of public anger will not be soothed by present economic conditions.
Productivity Issues:
Productivity has been growing very rapidly since this recession began in late 2007. Thus, business is getting much more from each employee. In the final quarter of 2009 productivity spiked upward at an annual rate of 6.9%. The same workers produced 6.9% more per hour across the last 3 months of last year. Thus, hours did not have to be increased and new employees did not have to be added. The longer term trends are identical:
From the fourth quarter of 2008 to the fourth quarter of 2009, productivity increased 5.8 percent as output declined 0.2 percent and hours fell 5.7 percent (table A).[1]
We are seeing business save on wages and hours while getting more goods and services produced by existing workers. This is slowing hiring of new workers and adding to corporate bottom lines. We are seeing the most disproportional relationship between output, hours and pay recorded in the last 62 years. Output per worker hour is surging. Pay and employment are not. This helps explain how we are seeing rising profits and GDP with no improvement in employment.
Unit labor costs in non-farm businesses fell 5.9 percent in the fourth quarter of 2009, the result of productivity increasing faster than hourly compensation. Unit labor costs decreased 4.7 percent from the same quarter a year ago, the largest four-quarter decline since the series began in 1948 (table A). The annual average index of unit labor costs declined 1.7 percent from 2008 to 2009, the largest decline in that series (table D).[2]
All of this suggests a very sharp divergence between corporate profits and employment conditions.
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[1] Productivity and Costs, Fourth Quarter Annual Averages 2009, Revised. Bureau of Labor Statistics. 04 March 2010.
[2] Ibid.